A budget deal that would prevent a snap election next week is closer after NDP Leader Andrea Horwath backed off her party’s demand for the minority Liberals cut the HST on home heating bills.

In a move the Liberals called “significant,” Horwath said Thursday her proposal, which would have cost $350 million a year, was no longer a condition for supporting the budget in Tuesday’s vote.

While she has not yet agreed to back the Liberal budget, her concession Thursday was the strongest suggestion yet a deal is looming.

“The direction I’m moving in is the direction of trying to make it work,” Horwath said. “The ball is definitely in the government’s court at this point.”

Finance Minister Dwight Duncan praised Horwath for compromising.

“I give her a lot of credit. It shows that she wants to make the Parliament work,” Duncan said in an interview.

“I have to stress … the credit-rating agencies are going to be watching this very carefully … so it’s significant, but we’re not all the way there yet,” he said.

For more than a year, Horwath had sought to remove the 8 per cent provincial portion of the 13 per cent harmonized sales tax off of home heating. The Liberals balked because they have already imposed a 10 per cent rebate that costs Ontario $1 billion annually.

Horwath repeated her demand for a new wealth surtax on the “super rich” earning more than $500,000.

Her plan is popular with Ontarians — a Forum Research poll released Thursday found 78 per cent in favour and only 17 per cent opposed.

Sources say it has also been well received in the Liberal caucus and at cabinet table, though Premier Dalton McGuinty is leery. The new levy would bring in between $440 million and $570 million to a treasury that has a $15.2 billion budget deficit.

Tory MPP Peter Shurman (Thornhill), whose party plans to vote against the budget, said “we stand firm” in opposing the surtax.

“We don’t think that another source of revenue for this government at this time is appropriate,” said Shurman, the PC finance critic.

But Horwath insisted the largesse could be used “to fund 4,000 childcare spaces, health-care services, and an increase in support for disabled Ontarians — remaining funds could strengthen Ontario’s bottom line.”

Reducing the deficit is an idea that some NDP MPPs have been pushing behind closed doors.

“Why not show people that we can do things a little differently and get more credibility,” said one member.

As a sign of the Liberals’ respectful treatment of Horwath, Education Minister Laurel Broten postponed a news conference, which had been scheduled before Thursday’s NDP event, at the same time in order to ensure the New Democrat leader got more press.

“I’m just trying to work together,” Broten said to the Star.

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